New OAC Online Seminar: John Conroy Intimations of the 'informal economy', 16th April to 28th April

The seminar opens on Monday 16th April and will be closed Saturday 28th April.

You can read the new Working Paper here (warning it's long, but very interesting and you can be selective).

This paper considers the idea of informality in market exchange, as introduced into the economic development literature by Keith Hart in the 1970s. In addition, it discusses three writers who may be considered forerunners. Each, to a greater or lesser degree, anticipated the idea of informal economic activity and described it in a particular historical period and place. They are the mid-Victorian journalist Henry Mayhew (London, c.1850) (cf. Swift 2011), the libertarian economist P. T. Bauer (British West Africa, c.1948) and the economic anthropologist R. F. Salisbury (colonial New Guinea, c.1952-1963).

John Conroy is an economist, not entirely unreconstructed although he still calls himself a ‘development economist’. He spent the 1970s in Papua New Guinea, finishing as Director of the PNG Institute of Applied Social and Economic Research. After six years in Indonesia, during the 1980s, he ran the Foundation for Development Cooperation through the 1990s, specialising in microfinance and ‘financial inclusion’. He abandoned that field in disgust after its invasion by private equity, and is now a visiting fellow at the Crawford School of Economics and Government at the Australian National University.

Replies to This Discussion

John, I am satisfied within the limits of this medium by your full, honest and illuminating answers to the questions I posed. I want to leave with a comment on how the informal economy/sector has distracted us from grounding our inquiries in the human economy of what people do in their everyday lives. This was prompted by your reflections on rural and urban livelihoods and on the tendency to classify popular economic activities, often pejoratively.

I did some fitful research on Rossendale in Northeast Lancashire. When coal was nationalized in the 1940s, some 50 strip mines were listed in the district usually operated by one man for personal use, but sometimes on a scale sufficient to supply an enterprise (one involved a bus driver supplying a small cotton mill by mining in his spare time). Small-scale quarrying for construction materials was also widespread. Many workers kept “pens” for domesticated animals on the hillsides, raising them for sale or family consumption. All of these activities were common before the industrial revolution, as was a lively engagement with long-distance transport, trade and catering (medieval pilgrims sustained this complex), plus theft from factories and warehouses distributed by a variety of illegal means. I will never forget being woken up to buy a TV set in its box after a truck broke down nearby.

Marx and Engels held that the state was an archaic institution rapidly being made obsolete by a new phase of industrial capitalism. The factory system was driven by the cumulative addition of machines to human labour, rapidly concentrating workers into new manufacturing centres. There they were better able to organize and thus to offer an effective counterweight to the power of the owners' money. The new universal class, in contrast to Hegel's idea of a state-made bureacracy acting in everyone's interest, was thus working people in general, led by the factory proletariat. The latter had no property save their labour power, but they had the potential of combination, unwittingly provided by the capitalists who bought it. They were a class separate from both the small urban proprietors (kleinstädtisch or 'petty bourgeois') and the dangerous classes who lacked stable employment, the lumpenproletariat. But they would represent society as a whole, unlike the capitalists.

Why did Marx and Engels think that working in a factory endowed anyone with a potential for making revolution? Somewhat after they settled in England, the Lancashire cotton famine of 1861-64 took place. As a result of the American civil war and the North's blockade of Southern ports, the supply of raw materials to the textile industry dried up, causing massive unemployment in towns wholly specialized in cotton products. The owners petitioned parliament to send battleships to relieve the blockade; the workers held demonstrations in favour of the North and the freedom of labour. People died for sure, but not as many as would have if the workers had no other resources than their factory jobs. What sustained them materially and socially at that time? The informal economy and their own home-made institutions. We know about the ideology and activism of Lancashire workers from the agitators who flourished in the 1840s at the time of Chartism. Lancashire was virtually empty before the industrial revolution and the bulk of the new proletariat came from the Celtic fringe, from Ireland, West Scotland and North Wales. We could assume that they were formed entirely by their new conditions of employment (Gluckman: “An African townsman is a townsman”); or we might suppose that they brought with them the qualities of migrants who had never suffered feudal domination. The terrain of Lancashire shares with the rest of North and West Britain a wild landscape which offered a means of escape from the dark satanic mills. The buoyancy Marx and Engels noted in Lancashire's workers might have had several sources. Subsequent experience suggests that working in a factory was unlikely to be one of them.

Later work by Marxist historians, especially E.P. Thompson, emphasized the contrast between rural and urban work conditions. At first the new wage labourers brought peasant attitudes into the factories. If a sheep was sick, they stayed at home to tend it. The owners could not put up with such slackness; the steam-driven machines used up fuel continuously and human work patterns had to be adapted to this. The imposition of time discipline was often brutal. Gradually it became established that workers were paid for precisely how long they worked and how much they produced. The sociologist, Neil Smelser, emphasized the institutions Lancashire workers created outside the factories to mitigate their lot, friendly societies and similar mechanisms of social insurance. Much later, Beatrice Webb reports, in My Apprenticeship, the shock she had when she left London for the first time to visit her Northern relatives. Used to the urban rabble depicted so vividly by Gareth Stedman Jones (Outcast London) -- and by Henry Mayhew of course -- she found a whole new working class civilization in the North. This was built, she says, around three institutions made by the workers themselves: the chapel, the union and the co-op. Each of these united collective and individual interests: the congregation was offset by protestant individualism; solidarity at work by private ownership of tools; combination in the marketplace by private property.

There is therefore a social history of working class institutions and economic practices in nineteenth century Britain which offers material for comparison with developing countries today. It is surely essential to combine studies of the workplace with the institutions people devise outside it to meet their needs. The informal economy was as much a strategy of the Lancashire factory workers as it is inside and outside the citadel of protected high-wage employment in India today. The great merit of the functionalist method has always been that it reflects what people really do in their lives, not what academic specialists choose to study.

I have often reflected on how a West African urban ethnography led to the discovery of a new concept and lately this has led me to regret that my own ethnographic mission was permanently diverted by the drive to communicate with development economists. One example is this piece on my blog: the story of an ethnography untold. I believe that the standard accounts of modern economic history are seriously defective in that they do not grasp how people really live. Equally, ethnographers often miss the larger point of what they are studying. This is why I have drawn so much pleasure from our correspondence and now from this exchange. Thank you, John.

John Conroy said:

Keith, thanks for a searching set of questions. These go to the heart of my problems in drawing my larger argument together, and in imposing coherence on the ideas. I’ll try to respond to some of the issues you have raised (though some readers might think Melanesian issues are getting rather too much attention).

Knut, the history of attempts to map and quantify the interactions between players in the economy go back at least to William Petty’s Political Arithmetick in the seventeenth century, and it is from him that economists and statisticians derive the famous generalization: the initial dominance of the agricultural ‘sector’ yields to a rising manufacturing ‘sector’, and in time to the rise of services, during the process of development. At the time he was impressed by the wealth of the Dutch, which he attributed to the greater relative importance of service industries, trade and transport in the Dutch economy (the East Indies, and all that). Peter Bauer and Richard Salisbury both drew on these concepts (and Petty’s generalization as refined by Colin Clark) for their accounts of the importance of services in, respectively, British West Africa and Australian New Guinea. I examined Bauer and Salisbury’s treatments of the subject in the course of making my case for them as precursors of Hart’s informal economy. You are quite right to point out the arbitrary nature of any such statistical taxonomy, the primary justification for which is the degree to which it yields helpful explanations of the phenomena which it is designed to capture. So I do agree that ‘all conceptual carving up of social life leaves a residue’, an unexplained element that the constructs cannot accommodate. Mallika’s comments are helpful in drawing the distinction between a ‘sector’ in terms of national economic accounting and as ‘as a social segregation of people who are barred from the world that is called ‘formal’. When economic theories are built on the foundations of accounting constructs it is salutary to have a Keith Hart point out the ‘discrepancies’ (a key word in his writings) between theory and reality. Mallika’s comments about the importance of history and the significance of wrenching social change in the context of changing government policies are also stimulating and I think Keith has addressed them to some degree in his response.

I’d like to conclude by acknowledging Justin Shaffner’s judicious moderation of this rather wide-ranging discussion. I imagine that given the spread of time zones in which the participants live he must have kept rather long and irregular hours these past two weeks. Thank you, Justin

Keith, I have enough sense of the anti-climax to avoid attempting to respond to your final remarks. You may expect to hear echoes of them in my subsequent scribbling. I thank you and your colleagues for the opportunity to join the Open Anthropology Cooperative and to contribute to it, and I thank you personally for your warm and positive response to the paper.

Keith Hart said:

John, I am satisfied within the limits of this medium by your full, honest and illuminating answers to the questions I posed. I want to leave with a comment on how the informal economy/sector has distracted us from grounding our inquiries in the human economy of what people do in their everyday lives. This was prompted by your reflections on rural and urban livelihoods and on the tendency to classify popular economic activities, often pejoratively.

I did some fitful research on Rossendale in Northeast Lancashire. When coal was nationalized in the 1940s, some 50 strip mines were listed in the district usually operated by one man for personal use, but sometimes on a scale sufficient to supply an enterprise (one involved a bus driver supplying a small cotton mill by mining in his spare time). Small-scale quarrying for construction materials was also widespread. Many workers kept “pens” for domesticated animals on the hillsides, raising them for sale or family consumption. All of these activities were common before the industrial revolution, as was a lively engagement with long-distance transport, trade and catering (medieval pilgrims sustained this complex), plus theft from factories and warehouses distributed by a variety of illegal means. I will never forget being woken up to buy a TV set in its box after a truck broke down nearby.

Marx and Engels held that the state was an archaic institution rapidly being made obsolete by a new phase of industrial capitalism. The factory system was driven by the cumulative addition of machines to human labour, rapidly concentrating workers into new manufacturing centres. There they were better able to organize and thus to offer an effective counterweight to the power of the owners' money. The new universal class, in contrast to Hegel's idea of a state-made bureacracy acting in everyone's interest, was thus working people in general, led by the factory proletariat. The latter had no property save their labour power, but they had the potential of combination, unwittingly provided by the capitalists who bought it. They were a class separate from both the small urban proprietors (kleinstädtisch or 'petty bourgeois') and the dangerous classes who lacked stable employment, the lumpenproletariat. But they would represent society as a whole, unlike the capitalists.

Why did Marx and Engels think that working in a factory endowed anyone with a potential for making revolution? Somewhat after they settled in England, the Lancashire cotton famine of 1861-64 took place. As a result of the American civil war and the North's blockade of Southern ports, the supply of raw materials to the textile industry dried up, causing massive unemployment in towns wholly specialized in cotton products. The owners petitioned parliament to send battleships to relieve the blockade; the workers held demonstrations in favour of the North and the freedom of labour. People died for sure, but not as many as would have if the workers had no other resources than their factory jobs. What sustained them materially and socially at that time? The informal economy and their own home-made institutions. We know about the ideology and activism of Lancashire workers from the agitators who flourished in the 1840s at the time of Chartism. Lancashire was virtually empty before the industrial revolution and the bulk of the new proletariat came from the Celtic fringe, from Ireland, West Scotland and North Wales. We could assume that they were formed entirely by their new conditions of employment (Gluckman: “An African townsman is a townsman”); or we might suppose that they brought with them the qualities of migrants who had never suffered feudal domination. The terrain of Lancashire shares with the rest of North and West Britain a wild landscape which offered a means of escape from the dark satanic mills. The buoyancy Marx and Engels noted in Lancashire's workers might have had several sources. Subsequent experience suggests that working in a factory was unlikely to be one of them.

Later work by Marxist historians, especially E.P. Thompson, emphasized the contrast between rural and urban work conditions. At first the new wage labourers brought peasant attitudes into the factories. If a sheep was sick, they stayed at home to tend it. The owners could not put up with such slackness; the steam-driven machines used up fuel continuously and human work patterns had to be adapted to this. The imposition of time discipline was often brutal. Gradually it became established that workers were paid for precisely how long they worked and how much they produced. The sociologist, Neil Smelser, emphasized the institutions Lancashire workers created outside the factories to mitigate their lot, friendly societies and similar mechanisms of social insurance. Much later, Beatrice Webb reports, in My Apprenticeship, the shock she had when she left London for the first time to visit her Northern relatives. Used to the urban rabble depicted so vividly by Gareth Stedman Jones (Outcast London) -- and by Henry Mayhew of course -- she found a whole new working class civilization in the North. This was built, she says, around three institutions made by the workers themselves: the chapel, the union and the co-op. Each of these united collective and individual interests: the congregation was offset by protestant individualism; solidarity at work by private ownership of tools; combination in the marketplace by private property.

There is therefore a social history of working class institutions and economic practices in nineteenth century Britain which offers material for comparison with developing countries today. It is surely essential to combine studies of the workplace with the institutions people devise outside it to meet their needs. The informal economy was as much a strategy of the Lancashire factory workers as it is inside and outside the citadel of protected high-wage employment in India today. The great merit of the functionalist method has always been that it reflects what people really do in their lives, not what academic specialists choose to study.

I have often reflected on how a West African urban ethnography led to the discovery of a new concept and lately this has led me to regret that my own ethnographic mission was permanently diverted by the drive to communicate with development economists. One example is this piece on my blog: the story of an ethnography untold. I believe that the standard accounts of modern economic history are seriously defective in that they do not grasp how people really live. Equally, ethnographers often miss the larger point of what they are studying. This is why I have drawn so much pleasure from our correspondence and now from this exchange. Thank you, John.

John Conroy said:

Keith, thanks for a searching set of questions. These go to the heart of my problems in drawing my larger argument together, and in imposing coherence on the ideas. I’ll try to respond to some of the issues you have raised (though some readers might think Melanesian issues are getting rather too much attention).

It is true, as Mallika pointed out, that the late arrival of several participants left some of us wondering what might have happened if they had joined in earlier. So I have opened a new thread in the Human Economy Group where anyone who wants to may continue the conversation.

In closing the seminar, I would like to thank John again for his insightful paper and measured responses to the discussion it elicited. As chair, I decided to stay out of the discussion in the last few days to make space for the newcomers to define its direction.

I would also like to thank the various participants for their thoughtful questions and interventions. Due to the fact that there were so many late newcomers, and also several others who expressed interest in joining in but for various reasons were unable to at this time, we've opened a new thread in the Human Economy Group to continue the discussion. I, for one, would like to further discuss the concept of the informal economy in PNG, especially in relation to the contemporary context and I hope others with an interest in that corner of the world will join me.

John, thank you again for sharing your paper, time and expertise with us.